German and French policymakers have yet to face up to Europe’s real policy choice. They could choose to continue the pretense that the euro can be preserved in its present form. This would run the real risk of a costly and disorderly unraveling of the euro that could embroil a still-solvent country like Italy. Alternately, they could choose to recognize that several euro member countries will, in time, be forced to default on their sovereign debts and leave the euro. This recognition could allow them to plan for the creation of a new, well-functioning currency union among those core European members best suited to belong to such a union.